Sara EA

You need to read the trust document. If the parents retained "power of appointment," meaning they could change the terms, beneficiaries, trustees, borrow against trust assets, etc.--in other words, they maintained control over the trust assets and what they did with them--this is a grantor trust and income should flow to their personal return like you plan. Some irrevocable trusts are written to be "intentionally defective" so your plan still works. The trust doc may contain that exact phrase.

This from IRS FAQ: Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act? A3. You are a qualified individual if – You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention; Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention; You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19; You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19. So it's not any financial impact. It's more specific than that.

Just make sure the distribution is Covid-related. They or a family member essentially had to have had the virus or been quarantined, or had suffered financially due to reduced hours, job loss, lack of child care so they could work, etc. I have had several calls from clients who heard they could take the money out (penalty and tax-free!) and were just checking. Of course they were not told it had to be Covid-related. I had one who works for a huge area employer and said HR told him he could take out $100k and only pay 10% tax. He did it, even though he had not been impacted by the virus. After I told him what his tax liability would really be (and scolded him about setting back his future retirement income), he paid it back except for the withholding. That amount will be taxed and subject to the 10%. Another wanted to drain his IRA to pay off credit cards and thought he would be exempt from penalty. At the end of our lengthy back and forth about it, his employer furloughed everyone for one day a week because of reduced business, so finally my client had a reason that qualified. There's a lot of misinformation out there, so do ask questions about these retirement plan distributions.

One reason that everyone is so down right now is that we just got through the tax season that never ended. We couldn't do much in April because we were too busy taking calls about the stimulus payment and business loans. July was just like the usual April. Immediately after it was time for extensions, and October was just like April. Then it was time for CE. In between there were many more calls from clients who needed help with loans, retirement distributions, new W4s that are incomprehensible, and on and on. We never got a break, and for those who took a few days off there was no travel so we never really got away from it all. Another reason is that there were so many changes to the tax code, and changes to the changes, that our brains are overloaded. We now have to take update courses to the updates we already took. One poster said that she just didn't feel competent going into the coming season, and I think that feeling haunts many of us. Hang in there. We've mastered huge changes before and will again. The new heads of the IRS and Office of Professional Responsibility seem to hear us and to be genuinely supportive (as opposed to treating us like enemies of the gov't and their personal hit men). As the virus winds down and the IRS and congress get their acts together, things have to get better.

Anyone have any idea how it was determined who gets debit cards and others their stimulus payment by check or direct deposit? Ours were paid by check (we had moved and closed the bank acct on our 2018 return) and direct deposit (by then we had filed our 2019 return with updated bank info). I hate it when other things are refunded on a debit card. Buy a washer and dryer and get your incentive rebate on a dr card. No! I took the cash out of savings to buy the darn things and only want to replace the cash. I would think most folks would prefer their tax refunds/stimulus payments any way but dr card. You likely can't pay the rent or car payment or student loan with it. A few years ago the state of CT paid tax refunds with dr cards. There must have been a big backlash because it never happened again.

If assets are titled to the trust, the trust will get the tax docs in its EIN. Then a 1041 must be filed, but you can elect to report nothing but a statement that everything will be reported on the grantor's return and another statement listing the income and expenses the grantor must report. There is a code section for this that I don't have in front of me but it should be in the software elections. When the beneficiary receives a distribution, then K-1s will be issued. If the assets are still titled in the grantor's SS number, no trust return is required.

How can anyone be prepared when the rules keep changing?! I have completed my CEs for the year, including lots of updates so I'd be ready, and now it looks like I need update courses on my updates. (Last course I took spend 1/2 hour on not deducting expenses covered by forgiven PPP loans, what to do if forgiveness application denied or not completed after all. All out the window now--I need a course in unlearning things I just learned.) And now we're learning that the rules we haven't learned yet for 2020 will change again in 2021. We are all geniuses and will figure it out. Although we feel lost, we have to realize our clients will never be able to navigate any of this and need us now more than ever. I usually look forward to the new tax season but it seems like the last one was never ending and the new one has more hurdles than ever before. We've done it before and will do it again, right?

TerryD, tell the client to call the IRS himself! Give him the date the original was filed and the amendment, and tell him to ask why he is still getting bills. Then he can have it from the horse's mouth. More often than not, I have the clients call instead of me when it's not a complex notice because I do not have the time to wait on hold for half the day. I have a hunch, though, that maybe your client can't quite substantiate that extra deduction and fears it might be rejected. Why else would he be looking for an excuse to blame you? Warn him that IRS doesn't have to accept amendments, but you won't know if they do or don't until they process the return.

Aren't we being a little too harsh on the beleaguered IRS? The virus shut them down at the worst possible time (must be one of Murphy's laws). Unlike most of us, their employees can't just take home a box of unopened mail containing sensitive taxpayer data to work on there. At one time they had several lots the size of football fields of tractor trailers filled with mail, so they are making progress. At the same time they had to get out a zillion economic stimulus payments. Then they must have had a hundred zillion phone calls about it (a few zillion more than we had). Then there were the PPP loans and another few zillion calls and a zillion tons of new paperwork. I think they've pulled off something close to a miracle by handling all this. They only have a few million pieces of mail left to open AND prepare for the upcoming filing season. Piece of cake. A bright spot is that since so many employees working from home were set up with phones, call wait times were reduced this year. Credit where credit is due.

Our firm has purchased practices in the past. I have no idea about pricing, but I did see that it was very helpful to have the former owner (or spouse in the case of the one who died) around to greet their clients coming to us for the first time. The clients were relieved to see a familiar face. The prior owners introduced us and assured the clients that they were in good hands. While I don't have retention stats, many of those clients have stuck with us for years now. Covid-19, of course, has changed everything. If you will not be seeing clients in person (our firm has already decided not to), how are you going to greet and get to know these new clients? If they can't meet you, why come to you at all? I'd knock a few percentage points off just for that. Also, look at how far away the clients live. People may have moved some distance away but kept coming back to the old practitioner because they'd been with him for 20 years. Without him, they'll likely look for someone closer. We lost a lot of clients for this reason when the senior member in our firm retired and sold it to a junior member even though they already knew most of us and we were in the same place. Also do what cbslee suggested and look at the types of returns the seller has. After purchasing one practice we ended up firing many of the clients after a couple of years because they were used to getting away with things we questioned (big charitable contribs "same as last year," huge Sch C or employee business expenses, medical expenses that were paid for by insurance, etc.). Also see how the seller's pricing lines up with yours. If he undercharged, you can't raise the price to your standard all at once or the clients will flee. If he overcharged, his clients may have been complaining and will expect a fairer price from you. Both scenarios affect what you will be paying the seller.

The only reason to do this would be to claim a refund, and it's likely too late for that. If he owed, the statute is two years after he paid, so that might be a possibility. She would have heard from IRS if she owed, so there's no point in her filing now, separately or jointly, again because it's too late to receive a refund. Why do people do this? I had clients who came to me when the IRS attached paychecks. I prepared six years of returns, all of which had refunds, and they forfeited thousands of dollars because it was too late to claim some of them. I felt for sure they would file on time religiously after that because they had two kids in college. Nope. They contacted me each year to file extensions and I reminded them that they would get $5k in AOC but they still never got their stuff together. These were not wealthy people and they could have used that extra money.

This should be treated the way a checking account is when a parent puts a child's name on it. There is no gift if the parent funded it and the child does not withdraw anything for his or her own use. Only when the child takes money out does it become a gift. Still, since it's a brokerage account, best to make the child a beneficiary so there is step-up basis.

We just got a notice from Soc Sec that a W2 didn't match the 940. When we called and said that the 940 had been mailed, the guy who answered said that no one has been in that department for months. Are we in trouble or what?

A client had filed an estate return and was supposed to get a big refund. The original was efiled and we have IRS acknowledgement that it was received. When I got involved on the decedent's final return I noticed an error on the estate return, amended it, and the client sent in a check for the balance due. (In essence the original refund shouldn't have been so big.) They hadn't received the refund yet because the 1310 was missing. I fully expected an IRS notice asking for the 1310. Instead, client just received a notice that IRS got their check for the amended and didn't have an account to apply it to so asked for a copy of the return. The original was efiled so there has to be an account! He called IRS and was advised not to do anything, just to wait until IRS sorts it out. Congress recently asked IRS if it will be through the backlog in time for 2020 filing season. Good question.

Check the EINs. Sometimes one division of the same company has a different EIN from another. I had a client who switched divisions and got two W2s, same EIN, with excess SS withholding. The IRS said my client could only get the excess back from the employer, but the employer refused to change anything. We eventually resolved it by providing the refusal letter to IRS, but it took a long time.

An old friend brought his practice to ours a season before he retired. The preparer copies of returns were exactly like this, with other returns, P&Ls, etc printed on the backside. We finally realized that like many old timers, he didn't want to waste paper so printed his copy on the back of other returns that had a change after printing or statements he no longer needed. Chances are your clients were given his preparer copy with their file after he died. Do what the others suggest--copy the appropriate side and shred the whole thing. It is beyond your responsibility or ability to track down all of his former clients.

Have them send Form 14039. There you can check that you don't know if anyone filed taxes for you but that you are a victim. Then explain the circumstances. I did this for one client who was involved in a big data breach and hadn't yet experienced adverse consequences but was worried. He was given an IP PIN. The same for another client who had his cell phone shut off when someone bought a new one with his account info.

I have clients who filed a paper return for a deceased taxpayer in mid-May and it's still not in the system.

Thanks for sharing the link. Note that carrying costs pertain to costs while the property is being developed or improved, not day-to-day grass mowing. It looks like only the taxes can be capitalized and nothing else in this case. This leads me to wonder how those costs were paid. Did the partnership also have a cash account? The attorney surely was paid (surely!), and that is a deductible expense in the year paid.

Since the house was never rented, it is treated as investment property for tax purposes. Operating expenses are never capitalized. For individuals, real estate taxes can be capitalized but an election to do so must be made each year. If the rule is the same for partnerships, the best they can do is deduct any RE tax paid at the closing in 2019. Their basis is $200k, period.

The lawyers are the ones who should handle this. You stay out of it. It is not up to you to determine if they have to file jointly for 2019, and you certainly can't give him her W2. Usually in these cases she provides her lawyer with the requested info and that lawyer works it out with his lawyer. Civil court rulings do not override federal laws. I have had cases where a couple divorced before the end of the year and the divorce decree stated they had to file jointly for that year. I don't think so....

Illmas, you are not delaying your RMD, you don't have to take it all. Theoretically, that allows the money in the account to continue to grow tax free. Of course, it can also lose, and with this frothy market that isn't trading on fundamentals, who knows? I agree with Lion that if you don't need the money, this is a good year to convert what would have been your RMD to a Roth. Then you won't have to guess about what future tax rates will be and can take the money out when you need it, not because it's required.

I always put myself on extension and try not to get refunds, but sometimes it happens. I usually file in August and have never gotten interest on an overpayment before. This year I filed in May, only because I moved to VA which had a nonextended June 1 due date and being a part-year resident, I couldn't even guess what my tax liability would be so had to prepare the return. I had an IRS overpayment (my bad), and just had interest deposited to my bank. What??? The regular due date was July 15, so they were not even late in paying me (I actually applied the funds to 2020 so didn't even request a refund). It's like the IRS has reversed course, anxious to give away money instead of collect it.

Good decision. Pub 970 does state, "However, you may claim the credit if the student doesn't receive a Form 1098-T because the student's ed-ucational institution isn't required to furnish a Form 1098-T to the student under existing rules (for example, if the stu-dent ... is enrolled in courses for which no aca-demic credit is awarded). If a student's educational institu-tion isn't required to provide a Form 1098-T to the student, you may claim the credit without a Form 1098-T if you oth-erwise qualify, can demonstrate that you (or a dependent) were enrolled at an eligible educational institution, and can substantiate the payment of qualified tuition and rela-ted expenses." However, the pub also states "The course must be either part of a post-secondary degree program or taken by the student to ac-quire or improve job skills." Since your student has no job, it looks like no LLC. A bit of trivia: A number of years ago an anonymous donor gave the Yale School of Music a huge endowment to assure that all future music students would pay no tuition. What a beautiful bequest! Musicians even with world-class training at places like Yale do not have much chance of making big bucks right out of school like graduates with, say, MBAs or STEM degrees. To relieve them of the burden of student loans is truly a lifetime gift. There has been much speculation over the donor's identity. I think s/he was a highly successful musician (Ringo Starr? Cher?) who knows what it was like.

There are lots of divorced dads who can't claim their children as dependents but are required by the divorce decree to keep them on their insurance.